A revised “NAFTA 2.0” currently under negotiation could be a very bad deal for climate change.
The original 1994 North American Free Trade Agreement treaty is being updated, and the Trump Administration hopes “to seal a deal as quickly as possible,” says Ben Beachy, director of the Trade Program at the Sierra Club. Not surprisingly, the Trump team is not focusing on climate change in these negotiations, and according to a new Sierra Club report, “NAFTA 2.0” might well make a bad situation worse.
Working “under a veil of secrecy” says Beachy, the administration hopes to “shove it through Congress” before the next election.
The original text of NAFTA was “written in the late 1980s and early 1990s, when climate change was not on people’s minds,” says Gordon Laxer, founding director Parkland Institute at the University of Alberta and a co-writer of the report. “We shouldn’t use the dead hand of history from that era to lock us into policies into the 2020s and 2030s.”
But NAFTA 2.0, negotiated behind closed doors with little input from environmental or labor groups, threatens to do just that.
One particular point of concern is the “proportionality rule,” which according to the Council of Canadians “requires Canada to export a locked-in percentage of [its] energy production” to the United States.
The rule, adopted in 1989 and incorporated into NAFTA, is currently forcing Canada to sell three-fourths of its oil and half its natural gas to the United States, the Sierra Club study found. Furthermore, NAFTA requires that there be no change “between crude oil and refined products and among different categories of crude oil and of refined products.” This effectively mandates that a portion of Canada’s oil exports be tar sands oil, despite its high carbon footprint and devastating environmental impact.
“The rule is currently forcing Canada to sell three-fourths of its oil and half its natural gas to the United States.”
The proportionality rule also will force Canada to produce almost 1,488 extra metric megatons of climate change emissions by 2050, the study said. This will push the country past the emissions targets it promised under the Paris climate agreement.
And the rule forces fracking to continue at its current rate and forbids Canada from reducing the amount of oil and gas exports to the United States without reducing its own consumption.
Worse, the rule’s reach could also be extended to Mexico, which negotiated its way out of the rule in the original agreement. Even so, NAFTA has led to a quintupling of U.S. gas exports to Mexico since 2010, the Sierra Club study says, since it “bars the U.S. Department of Energy from determining if gas exports to Mexico are in the public interest.”
Besides expanding the proportionality rule, NAFTA 2.0 might make it harder to enact new climate regulations in a single country or locality. It could also “lock in privatization of Mexico’s energy,” warns Sujata Dey, trade campaigner for the Council of Canadians. If this happens, Mexico “may never, ever go back to public ownership.”
Another critical NAFTA provision is the investor-state dispute settlement mechanism. The mechanism allows corporations to sue any government that enacts laws that might hurt expected profits. Many view it as a critical threat to progress on climate change as well as labor and human rights.
Laxer of the Parkland Institute explains, for example, that when the Obama Administration blocked the Keystone XL Pipeline, meant to transport tar sands oil, TransCanada threatened a $15 billion suit. This may be an issue again should Canada decide to block the contentious Kinder Morgan pipeline, also meant to carry tar sands oil.
There are several ways that a new NAFTA could be climate friendly. According to the Sierra Club report, a better trade deal would recognize the Paris climate agreement in its core text, and ensure that corporations cannot increase their emissions when they cross borders.
A better NAFTA would eliminate the proportionality rule and the investor-state dispute settlement mechanism, and instead create mechanisms for challenging corporations that pollute.
What are the chances for a new, improved free trade agreement? It could happen, if the right combination falls into place.
Canada’s Prime Minister Justin Trudeau, says Dey, “presents an aura of wanting to do something about climate change.” Indeed, he is working toward a carbon tax across Canada.
In response to pressure from the oil industry, Trudeau is backing tar sands drilling, with additional pipelines to move increase production. But Dey describes this as as Trudeau’s gamble: “He thinks if he gives oil companies something, he will be able to get an agreement on a carbon tax.” Whether Trudeau comes around on NAFTA 2.0 makes Canada something of a wild card in the negotiations.
Mexico’s current government is unlikely to speak up for climate protection; it strongly supports the oil and gas industry. But elections are coming in July and the populist opposition leader, Andres Manuel Lopez Obrador, is promising change and holds a 22-point lead in polls. Campaigning on issues of national sovereignty, and of standing up to the Trump Administration, Lopez Obrador is likely to reject constraints on Mexico’s energy independence should he be elected, says Laxer.
Finally, there is the United States. While Trump has slavishly attended to the desires of the fossil fuel industry, the 2018 elections may bring big changes. Trump has also been known to turn 180 degrees at a moment’s notice and issues of national sovereignty could push him in unpredictable directions. Anything is possible.
Ethan Goffman is an environmental writer and national reporter for Mobility Lab.